While the effect of education and experience on labour market outcomes has been widely studied, the literature that analyses the influence of human capital competencies (talents, skills, and capabilities) is still relatively scarce. Using cross-sectional data from the REFLEX Project, we investigate the effect of personal competencies (both cognitive and non-cognitive) on two labour market outcomes among European university graduates: occupational status and earnings.
Our estimates suggest that individuals endowed with a higher level of competencies are more likely to occupy managerial and professional positions and, to a lesser extent, technician jobs. Additionally, they also receive higher wages, but the relation is only significant for men.
When we distinguish competencies according to their cognitive or non-cognitive nature, we find that only the latter are significant in explaining occupational status. In contrast, cognitive competencies are more related with wages.
As regards the role of specific competencies, our findings suggest that leadership is the most relevant competence for the occupational status of males, especially in managerial positions. In contrast, initiative and enterprise abilities seem to be the most relevant skills for women in such positions. Intelligence produces the highest rewards in terms of earnings among the male subsample, while none of the competencies exerts a significant impact on females’ wages.
• Occupational status is more associated with non-cognitive skills.
• Cognitive skills are significantly related with male wages.
• Leadership is the most related competence to managerial positions among men.
• For women, initiative and enterprise is the most relevant in managerial positions.
• None of the competencies exhibits a significant association with females’ wages.
Most of the literature analysing labour market outcomes has concentrated mainly on traditional human capital predictors such as education, experience, or job-specific training. Nonetheless, scholars have begun to question whether education continues to provide the skills that are most demanded in today’s labour markets. This was motivated by the fact that graduates are now expected to be competent in a broad range of areas, comprising both field-specific and generic skills. As a consequence, more attention has been paid in recent years to the importance of various types of human capital competencies as an effective tool to improve graduates’ chances of a smooth transition to the labour market.
This paper has aimed to shed more light on these issues. In particular, we have attempted to contribute to the existing literature by examining the relationship of both cognitive and non-cognitive competencies with graduates’ occupational status and wage formation. In addition, we have aimed to provide evidence of gender differences in these relationships. For this purpose, we have used microdata from the REFLEX database that contains information on young European graduates who were interviewed five years after graduation.
Although our results should be interpreted cautiously insofar as we cannot derive casual effects on the relationship between the competencies and labour market outcomes of European graduates, some relevant issues can be highlighted. Non-cognitive skills appear to be much more associated with graduates’ occupational status, especially with managerial occupations, than cognitive skills. Gender differences become apparent when looking at the specific competencies: leadership abilities seem to be more important among males working as managers, while females employed in such positions display higher levels of initiative and enterprise skills. In addition, it should be noted that the variety of competencies that are relevant for women in order to be employed as professionals, and especially as managers, is broader than that for men, thus suggesting that the labour market is tougher with regard to women’s competencies and skills. In contrast, cognitive abilities seem to be more rewarded in terms of earnings. Again, our results provide evidence of differences between males and females. Competencies associated to intelligence are associated with higher wages in the three occupational groups considered in our analysis only for males. Other types of cognitive abilities are also related to higher earnings among males employed as technicians and associate professionals. This is the case of new technologies and foreign language skills. In contrast, none of the identified factors that comprise cognitive abilities are statistically associated with women’s wages.
These results are of special relevance for both educational institutions and students who should work together in fostering those competencies that are most in demand and/or are most often in shortage. On the one hand, higher education systems could, for instance, promote more innovative educational methods that combine lectures with group assignments in order to more effectively develop those competencies that are more demanded by employers and produce the highest rewards in terms of wages. On the other hand, and given the heterogeneity and changing nature of the productivity-enhancing characteristics of graduates, it is important that they know which competencies are more valuable for employers in order to facilitate their educational choices and the acquisition of those skills that will enable them to take advantage of promising job opportunities. All these findings should be considered in order to design the best policies for improving the school-to-work transition process of graduates in Europe. Moreover, and for the purpose of improving labour market equity, policymakers should take into account the existence of gender differences as regards the association between competencies and labour market outcomes.
Chosen excerpts by Job Market Monitor. Read the whole story at Competencies, occupational status, and earnings among European university graduates – ScienceDirect